Today, the House of Representatives is voting on the American Health Care Act (“AHCA”), a bill that aims to repeal and replace the Affordable Care Act (“ACA,” also referred to as “Obamacare”). Here are ten of the major changes that the AHCA will bring to our healthcare system if it passes.
1. Repeal the individual mandate.
The AHCA would completely remove the individual mandate. Americans would no longer have to provide proof of health insurance in order to avoid a tax penalty. Instead, it would impose a 30% premium surcharge on individuals who experience a lapse in coverage of 63 days or more, including those with preexisting conditions.
2. Repeal the employer mandate.
The AHCA would completely remove the ACA requirement that employers with 50 or more full time employees provide health insurance for all employees. The tax penalty for large employers that do not provide health benefits would be reduced to zero and retroactively enforced to January 1, 2016.
3. Repeal the Medicaid expansion, eliminating healthcare coverage to approximately 10.8 million Americans.
The AHCA would end the Medicaid expansion by stopping federal funding for new Medicaid enrollees who do not meet the pre-ACA eligibility requirements. Pre-ACA eligibility requirements only included certain categories of low income individuals like pregnant women and children. While states may choose to retain ACA eligibility levels, they would have to do so entirely at their own expense. This may be cost prohibitive because the federal government paid 90% of the Medicaid costs for the expansion population under the ACA. The Medicaid expansion brought healthcare coverage to approximately 10.8 million Americans.
4. Changes Medicaid from an open-ended funding system to one in which states are given a fixed amount of money regardless of enrollment or need.
Under the AHCA, the federal government would no longer match state funding for Medicaid programs as it has historically done. Rather, the AHCA would establish a per capita cap model (differentiated somewhat from a “block grant”) that would limit federal spending to a set amount per state Medicaid enrollee without consideration of the state’s actual needs or costs.
5. Allows states to define “essential health benefits” and to impose annual or lifetime limits on benefits.
Beginning in 2020, states that obtain waivers from the federal government would be able to define the essential health benefits that insurance companies must offer in that state. In some states, this may mean that insurers could offer policies with significantly less coverage.
6. Allows insurers in waiver states to charge older Americans (age 50-64) more than five times the amount charged to younger Americans.
The ACA limits the amount that insurers can charge older Americans (ages 50-64) to a maximum of three times the amount charged to younger enrollees. The AHCA would change that ratio to 5:1 beginning in 2018; in other words, companies could charge older Americans five times the amount they charge younger enrollees. Furthermore, states could apply for a waiver to allow insurers to charge even more than the 5:1 ratio.
7. Effectively eliminates the pre-existing condition exclusion by allowing insurers to charge more based on the “health status” of the applicant.
The ACA prevents insurance companies from denying coverage or from charging an individual more based on pre-existing conditions or health status. The AHCA would allow insurers to return to pre-ACA rules, under which they could charge individuals different premiums based on health status. This would allow insurance companies to charge significantly higher (and perhaps unaffordable) premiums to individuals with pre-existing conditions.
8. Gives states $8 billion over five years to finance high-risk pools to cover individuals with pre-existing conditions who may no longer be able to afford health insurance.
Because the AHCA would allow insurers to charge individuals with pre-existing conditions significantly more than healthy individuals, the bill also offers states additional money to establish high-risk pools. These high-risk pools would provide supplemental funding to individuals with pre-existing conditions who cannot afford those higher costs, or who would be otherwise uninsurable. The amount allotted, however, may be insufficient to cover the actual cost of these pools.
9. Repeals the ACA’s cost-sharing subsidies that are based on income and replaces them with subsidies based on age and income.
The AHCA would repeal the ACA’s cost-sharing subsidy program and replace it with a program based on age and income rather than focusing only on income. For individuals earning less than $75,000 per year, the government would offer tax credits starting at $2,000 for individuals under 30, rising to $3,000 for those age 40 to 49, $3,500 for those age 50 to 59, and $4,000 for those over 60. The proposed law would limit subsidies to $4,000 per individual.
Health economists estimate that by 2020 the average enrollee would pay $2,409 more under the AHCA. In 2020, older Americans (aged 55-64) would pay $6,971 more, and those with income levels under 250% of the federal poverty level would pay $4,061 more than they would under the ACA. See the full analysis here.
10. Repeals taxes on the wealthy, insurers, pharmaceutical drug producers, and medical device manufacturers.
The AHCA would repeal several ACA tax provisions, including the:
— Cadillac tax;
— Tanning tax;
— Branded prescription drug tax;
— Medical device excise tax;
— Health insurance tax;
— $500,000 limit on business expense deductibility for compensation to insurance executives;
— Medicare tax imposed on unearned income on taxpayers earning more than $200,000 ($250,000 for joint filers);
— Repeal of the ACA’s Medicare 0.9% tax surcharge on taxpayers with incomes exceeding $200,000 ($250,000 for joint filers);
— Prohibition against paying for over-the-counter drugs with tax-subsidized funds from Health Savings Accounts (HSAs), Archer MSAs, or flexible spending or health reimbursement arrangements;
— ACA’s increase in the penalty for the use of HSA and Archer MSA funds for non-medical purposes (reducing the penalty from 20 to 10 percent for HSAs and 20 to 15 percent for MSAs);
— $2500 limit on contributions to flexible spending accounts; and
— Requirement that employers reduce their deduction for expenses allowable for retiree drug costs without reducing the deduction by the amount of retiree drug subsidy.
For a detailed explanation of the different taxes under the ACA, visit the Tax Policy Center website here.
For more information on the AHCA bill and subsequent amendments, read the Health Reform Tracker’s executive summary.